QUESTION 1
Explain the usefulness of median, lower quartile & upper quartile.
As employees hold the key to a dynamic and efficient business, it is vital to reward them sufficiently and justly in accordance with their contribution to the success of the organization. It enables a company to attract and retain talented employees required to meet the organisation’s business strategy and also motivates employees to operate at productivity levels that will enable the organization to achieve its objectives. The necessity for the reward strategy of a n organization to be congruent with business objectives and the consequent movement towards greater flexibility and variability are considered together with the important and growing concept of broad-banded basic pay systems. A well-managed remuneration system requires that certain ranges be used in the determination of performance-related and standard pay system in the company. This is where the median, lower quartile & upper quartile plays a role. Using median, lower quartile & upper quartile is useful if the range of values is small, as those of the remuneration structures within the company. A move in the market to focus on market related guaranteed packages pegged at the median or upper quartile is a shift from the common wisdom over the past 10 years where organizations aimed for a lower guaranteed package relative to the market and used to aim for lower quartile to the median. Companies who are best practice use the upper quartile, e.g. IBM & Siemens, while the retail & hotel industry has never been found to pay at upper quartile. If the market where the business is in is very competitive, chances are, the median and the upper quartile is used.
Relationship between the organization’s culture & reward practices.
Pay structures and systems of pay determination are socially determined and are influenced by the context and culture in which they are implemented. Such factors as employment relationship, diverse management and competitiveness are part of the company culture which determines what sort of reward practice the firm adopts within their organization. A contingency model of reward management requires the ‘tuning’ of remuneration to organizational culture to help achieve organizational objectives while appealing to the workforce. The theoretical process through which cultural factors existing within an organization, including values, account for differences in the effectiveness of many management interventions and tools and become important because they reflect enduring beliefs that a specific mode of conduct is personally or socially preferable, an objective state of mind, relationship or material condition that people seek to attain, normative standards that are used to judge and choose among alternative modes of behavior and conceptions of the desirable that guide the way that employees select actions, evaluate events and explain their actions. This host of factors shapes how management designs their reward system in an attempt to meet their employees’ expectations and attain organizational goals as well. For instance, companies with a high level of ‘uncertainty avoidance’ will be more in favor of compensation being based on either seniority or level of competence and skill; they were less inclined to favor a focus on individual performance or on employee ownership plans, but favored benefits such as provision of workplace childcare and career break schemes. Firms with a strong individualistic culture would understandably prefer pay for performance, a focus on individual performance, employee stock options and commission paid to clerical and manual staff.
QUESTION 2
The role of Performance Appraisals is an importance one in compensation decisions. Discuss 4 strategies to measure pay in relation to job performance.
To better understand and measure performance which would determine the pay structure of an organization, there are four approaches suggested:
Improve appraisal formats ~ ranking and rating employee performance against company standards provides the raters with the information that they need to be able to understand each individual employee’s behavior and attitude towards work, which reflects their willingness and the amount of effort that they put in their work. This could be used to determine how much merit pay is just and sufficient with respect to the results of their performance evaluation.
Select the right raters ~ to improve the accuracy of ratings that would lead to a correct allowance of the pay system to employees, the place to start is to find the raters that could competently and impartially get the job done.
Understand the way the rates process information ~ aside from the actual employee performance, factors such as the feelings, attitudes and moods of the raters affect the results of the performance evaluation. Errors in the rating process, in observation and in storage and recall and in the actual evaluation should be effectively remedied by the management so as to improve the accuracy of performance ratings that would be the basis of the design of the merit pay given to employees.
Train raters to improve rating skill ~ in order to reduce rating errors, there is a need to train the raters to be able to provide more accurate rates, thus a just and equitable merit pay for the workers involved.
Relate one process motivational theory to pay & performance.
The equity theory, which says that employees are motivated when the perceived outputs are equal to perceived inputs, relies more on the perception of the employees regarding their performance-based pay. Therefore, this is one of the more difficult theories to employ, although it is one based on a just and fair pay system. Employees often compare their pay with those of their peers at work, and when they perceive that the others are getting more for the same, or even worse, less effort, they react negatively in order to counter the pay-effort imbalance. There is therefore the need for management to control these perceptions through actually applying the theory of equity in their pay system. Giving employees their due, without a trace of bias and subjectivity in the design of the pay system would give the workers the perception that their inputs would subsequently gain its rightful output without having to worry about unfairness. Performance measures must then be clearly defined and communicated to the employees, and it must be known to everyone that improvements or increases in performance will amount to a parallel increases in pay. Fairness and consistency should be apparent in the pay systems to maintain the employees’ perception of equity.
QUESTION 3
Identify the 4 basic elements in effective leadership reward strategies.
Organizations adopt leadership reward strategies, especially for top companies, designed to develop leaders. As leaders are recognized to be strategically important to an organization in that if they do not succeed in their jobs, the success for the whole company is jeopardized; there is a need to design a pay system unique to their needs and position. There are four basic elements that are considered in effective leadership reward strategies, as follows:
Role ~ being a leader entails challenging roles which are of huge scope and is coupled with responsibilities and risks that significantly affect the results of an organization. Some of the more common leadership roles are path-finding, aligning, empowering and modeling. Path-finding helps the leader create a blueprint of action and ensure that plans are feasible and productive before acting on it. Aligning means working to align systems, processes, and structure with the desired results that were identified through path-finding. Empowering employees is releasing the talent, energy, and contribution of people by
letting them figure it out on their own and yields high trust, productive communication between individuals and teams, and innovative results where each member of the team feels welcome to bring his or her genius to the table. Modeling is setting an example for the subordinates to follow. These roles, among others of equal importance, need to be reflected in the reward strategies, to motivate leaders to excel, as the most basic reason.
Responsibility ~ a host of responsibilities are entailed by the roles of being a leader. The amount and scope of responsibilities of the leader should be justly and equitably rewarded if only to ensure that the leader gets the recognition and remuneration equal to what performing his or her responsibilities bring to the bottom line results of the company.
Risk ~ being a leader means having to take risks which ordinary employees are not expected to do. Taking these risks require a significant amount of wise decision-making and courage which only true and dedicated leaders could have. This exceptional achievement, like any other achievement in the company being rewarded, should be given rightful attention to in the formulation of reward strategies
Results ~ as ordinary workers are judged based on their performance; leaders are likewise measured in terms of the results that they are able to contribute to the company’s bottom line. There are already, in fact, existing reward systems which recognize the significant contributions of an organization leader to the group as a whole. The results should be a basis for rewarding leadership, as they are effective measures of how well they have done in the performance of their duties and responsibilities.
Compensation strategy for Special Groups
Data gathered form different organizations reveals that different compensation strategies are being employed for the respective company’s Special Groups. According to Health Minister , National Kidney Foundation (NKF) Singapore’s former CEO Mr. received 0,000 per annum as compared to NKF-UK’s CEO who receives not more than 5,718 per annum and NKF-US’s CEO who collects not more than 6,757 per annum. The SATA CEO’s income shot up from 13K to 22K per month, even though the operation revenue decreased. Meanwhile, Singtel CEO’s are paid lower hen compared with StarHub & AT & T CEOs.
CEOs of the top 100 companies make an average of .7 million per annum, much higher than those received by CEOs in France, amounting only to an average of million in a sample of the 300 largest European companies. United Kingdom CEOs receive far less than US CEOs, trailing behind European CEOs by 16 percent, and other European country CEOs lagging even further behind. From an inspection of CEO compensations in the Asian region in the previous paragraph, suffice it to say that they receive the lowest range of salary from among the countries inspected. Professional employees’ compensation, on the other hand, specifically scientist and engineers, are harder to allocate, as their professions are a constantly evolving fields of knowledge, and they require receiving compensation far beyond the base pay most ordinary workers receive. Equity is also a problem, and has resulted in the use of maturity curves. Sales professionals also have a unique compensation package being offered to them, as the nature of their job (selling), calls for incentive payments tied to their individual performances in the field. They often have a base salary pay apart from the commission pay that they receive depending on the sales that they made for a particular period.
Credit:ivythesis.typepad.com
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